If you are anything like the rest of the UK population, you probably spend a reasonable amount of time thinking about your house, your mortgage and whether you can afford another of either of them. Particularly given that so many others apparently can (the latest Royal Institution of Chartered Surveyors’ survey shows the highest level of housing transactions since March 2010).
You probably also look at the mortgage best-buy tables every so often, and think that loans look pretty affordable. After all, if you can borrow hundreds of thousands of pounds at 2.5%, what can go wrong?
Regular readers will know that we consider the list of answers to this question to be pretty long. But you should also note that headline mortgage rates are barely worth the paper they are written on. That’s partly because they are only available to the best of borrowers (the less you need the money, the less you pay for it). But it’s also because lenders need to make their margin somewhere.
So almost all their cheap-looking deals come with whopping great ‘arrangement’ fees. Data from Moneyfacts shows that these fees have hit a 25-year high: the average is now over £1,500. That’s up 8% since January alone.
There are no rules against this, and most people should be able to figure out whether a deal with a lower interest rate and a higher arrangement fee is better than another with a higher rate and no fee (Moneysavingexpert.com has a calculator to help).
But it is yet another example of the financial industry flatly refusing to accept that its customers would appreciate them prioritising simplicity and transparency, over price-confusing trickery. It also makes best-buy tables worse than useless.
The same goes for savings accounts. As Kevin Mountford of Moneysupermarket points out in the Evening Standard, while there has been a “mad focus” on headline rates in the last few years, banks have also added huge new layers of complexity in their terms and conditions – which ensure that large numbers of savers never see the rate they think they sign up for.
Take the Direct Saver instant-access cash individual savings account (Isa) from Santander. It pays a pretty dismal (but, sadly, reasonably competitive) rate of 2% in interest. However, most of that comes in the form of a 12-month bonus payment. Fail to move your money as soon as you get that cash, and you will see the rate plummet to a mere 0.5%. Hopeless.
The other standard trick these days is to cut your interest if you make withdrawals. So make more than four withdrawals from West Brom’s Direct Bonus Account (which offers seemingly one of the best rates on the market) and you’ll be charged 90 days’ interest on it. And make any withdrawal in a month from the HSBC Online Bonus Saver and your interest rate will drop from an already feeble 0.75% to an utterly pathetic 0.25%.
Just another reminder of the non-stop vigilance required if you are dealing with the UK banks and their ongoing efforts to baffle what is left of your money from you.